(Bloomberg) – The ailing Indian unit of Vodafone Plc is in talks with the country’s largest lender over new loans, people familiar with the matter say in a deal that could pave the way for d other banks to provide credit and increase the trapped wireless operator’s chances of survival.
The State Bank of India has asked Vodafone Idea Ltd., a joint venture between Vodafone and billionaire conglomerate Kumar Mangalam Birla, to define a turnaround strategy first, the people said, asking not to be identified as the talks are private.
The government lender has asked Vodafone Idea to present a detailed plan on their financial viability, including a capital injection from the largest shareholders, cash conservation plans, pricing outlook and a roadmap to return to profits, according to familiar people.
The mobile operator is preparing this information for the lender, the people said. Discussions are still ongoing and there can be no assurance that the company will receive this funding.
The State Bank of India did not respond to an email seeking comment. Vodafone Idea, which releases its quarterly results on Friday, declined to comment.
The bank loan, if it materializes, will be a lifeline for the company which has not reported an annual profit since Reliance Jio Infocomm Ltd. by Mukesh Ambani started a price war in 2016 and has lost subscribers to bigger rivals in the past year. Banks became more favorable to the unprofitable wireless operator after India announced a series of policy relief measures in September, which helped Vodafone Idea avoid a threat of insolvency.
India’s third-largest wireless operator survived a potential bankruptcy after the government gave mobile companies more time to pay their dues. This extinguishes some of the bank guarantees that Vodafone Idea has given to the government, giving lenders more leeway to extend credit, one of the people said.
Vodafone Idea’s total debt stood at 1.9 trillion rupees ($ 26 billion) at the end of June, of which 1.680 billion rupees owed to the government and the remaining 234 billion rupees to lenders, according to a 15 September from brokerage firm JM Financial.
The State Bank of India is the most exposed to Vodafone Idea among other lenders, people familiar with it said.
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